Sunday, July 24, 2016

Continuous Back-Adjusted Contract

Reblogged from the Insights Blog

Example article from the The Private Banker research section:

The higher time frame analysis becomes tricky especially when you are looking at a market that rolls its contracts every month. The answer to this depends on what you’re looking to see. Are you just looking for psychological levels? Or are you looking for levels that will reflect physical inventory?

Wednesday, April 20, 2016

Crude Oil Market Recap

I could not find any valuable trade since several days. There are sometimes such times in which I analyze the market and don't get the story, lol. It's a good idea to take a nice break from trading in these times or the market would try to heartbreak the trader if you know what I mean. I've learned my lessons in the lovely past. Anyway, today was a great day in Crude Oil. We had a knee-jerk move to the north and I took the opportunity to participate in this trip to the Mount Everest, so I thought to write a post about it.

Firstly and foremost, it's the settlement day for the May contract (expires today). At Monday the volume has rolled over to the June contract already. That said, since Monday I looking at the June contract.

Next thing is the COT report as I like to see what the managing money sector done in the previous week and maybe the numbers are of some help for you as well. ICE Europe and NYMEX as well as Options and Futures combined, Money Managers were net buying 27,635 contracts of WTI Crude oil in which short covering has dominated the flow with 24,173 contracts, in the week endend April 12.

Let's move our eyes to the weekly US Dollar Index chart. We are still testing the mentioned macro balance area low which seem to support Crude oil in some degree. The previous week was a ouside bar (previous week's high and low got taken out) which could indicate change in the market context due to the macro braket low, I guess.

For the sake of diversification let's employ a bottom up analysis process today. With that said and looking at the daily profiles (ETH/Globex), we can identify Tuesday's double distribution volume profile with an unsecured low. This profile type is quite tricky to trade sometimes but the brave secret here is to split the profile. I will elaborate what I mean with this in the next paragraph, patience please. With looking at the current profile, we opened (ETH/Globex) in the upper distribution but below the VPOC (Volume Point of Control). The market did not test that VPOC in the overnight session and quickly tested the ETH value area close level to find some balance there but continued its exploration in the lower distribution. Notice that we never broke the distribution low in this lower area. In the end and with help of the Crude oil inventoires the market gone vertical.

How to trade this thing with a split now? Simple, look at the following screenshot:

As you can see with the split you have two profiles to conclude your scenarios and more levels to trade from. As the market opened with a open drive (open level in such cases highly potential area to revisit) in the combination with the untouched naked VPOC it made the most sense for me to take a trade from that lower VVAL level in the U.S session with a stop location below the distribution low. Sure, to hold a trade during the inventories is not the best idea but let's avoid to be pussy-whipped. Anyway, in this case the golden luck was on my side although my target was that mentioned naked VPOC level, so I missed more than 50% of this upside move.

Moving forward to the weekly profiles in order to identify some confluent levels, we can observe support from the previous week's VVAL close level and it seems the low volume area were enough filled with volume in this week. Also, to mention is the VPOC in the lower distribution.

Last but not least, the monthly profile. With looking at this, you can quickly identify the previous month's TPO acceptance area and its supportive lower level:

In summary the marekt offered some nice levels that were confluent with our intra-day trading location.

With all that said, I hope you had a great day! Stay happy.

Sunday, April 3, 2016

Crude Oil Market Observations

Unfortunately, last week I missed posting my pre-analysis on Crude oil. However, heading to the next week I wrote my thoughts and observations on this market, first going through the plain charts and then through the volume profiles. It's a good idea to begin with the Commitments of Traders Report today.

Looking at this COT report, we can see that the Managed Money section were net sellers of 15,892 contracts of WTI Crude oil (NYMEX, ICE and Options, Futures combined) with selling of 13,210 contracts and a long liquidation of 2,682 contracts in the week ended March 29.

Here a screenshot for you:

The US Dollar Index is one time framing lower on the daily perspective. At the same time we are testing the macro balance area low currently. I will closely observe this lower macro balance extreme as we could see some support here. Try to study the US Dollar with Crude Oil for a better market feeling.

Ok, let's dig into Crude oil now. We start off with the plain monthly timeframe. Looking at this timeframe, we can observe that February's high got taken out. The one time framing lower behavior that occured for several months ended. So, we are currently in balanced state. However, it seems like there were some selling going on into this upside move because of the candle's reaction in March.

Looking now at the monthly volume profile, we can see that the market opened inside of the previous value close area but quickly moved lower to test the TPO single print. Guess, I mentioned this low volume area in my video analysis as possible location to fill up with volume. In my opinon we could see some rotational behavior between the two major distributions in order to fill this area with volume before the market decides its direction. It depends on the open, but I have a more bullish feeling with possible resitance at the previous VVAL close level. My bullish feeling is declared because of the unsecured high in March as a possible area to revisit.

Moving forward to the weekly timeframe, we can see a clean break lower. With this a move lower to test the marked balance area low (bracket low) is possible.

Now looking at the weekly volume profile chart, we can straight identify a poor low and a poor high as possible areas to revisit. The NPOC could be also a posible level to be cleared. Based on the previous week's close, we could see some lower prices to clear the NPOC followed by support at the same level.

In the daily timeframe we are one time framing lower. Firday leaved us with an unsecured high and a b shaped profile. Again it depends where the market will open tomorrow to conclude a better scenario. A open inside of value would be handled as rotational/bearish with resitance at VVPOC/VVAL. A break above these metnioned levels should bring the market to higher prices in my opinion.

In summary, there is quite some conflicting information here. But as said the open will bring some light into all this. Keep it simple and stay focused.

Thursday, March 24, 2016

Crude Oil Trading Recap

WTI Crude Oil opened below the ETH (Electronic Trading Hours / Globex) volume value area. Before the London open the market formed a poor high and I have expected a test of the VVAL level for a potential short trade but the market sold off in the overnight session without a meeting with that lovely location.

Looking at the weekly profile, we can identify the nice support from the previous week's VPOC and POC in an acceptance area:

That level was confluent with the NPOC (TPO based) around 38.35 on the daily profile chart. Actually, I gone short too early around the 38.75 VVAL level and paid my impatience with a stop out. However, the reaction around the mentioned NPOC and the following long trade paid me back quite well.

That said, emotional calmness after a stop out is pretty lucrative. Anyway, stay tunned for a pre-analysis later this weekend on CL.

Have a great weekend!

Euro Bund Trading Recap

Absolutely, Euro Bund made the most sense for me today. There was such an honorable confluence in this market that I was able to fall in love with it. Obviously, I was in such a degree touched that I have sent my fist to the air and shout: yes. The best is: I can keep it simple here. Looking at the weekly profile, we can identify a previous acceptance area and additionally a VVAH (Volume Value Area High) close level that is confluent with a VVAH level from the daily profile chart. That's it.

Here the weekly profiles:

Here the daily profiles:

At the open I thought about a possible long trade from yesterday's VVAH level but the market took out the poor high and moved to the north. Anyway, stay tunned for a pre-analysis on the Bunds this weekend. Actually, looking at the charts, it should trigger a possible Déjà-vu in your mind right now.

Wednesday, March 23, 2016

Stop Scale Out Method

Additionally to the Tactical Risk Management with the scale out method discussion, I thought about the possibility to scale out of a losing trade and how this would look in a potential trade scenario. So, I've added a third column to our known figure that compares a normal Scale Out Method, No Scale Out Method (All-In/All-Out) and the additionally Stop Scale Out Method.

The trade scenario: 3 Contracts, Target: 5 Points, Stop: 3 Points. The Stop Scale Method scales out of a losing trade at 1 Point, 2 Points and the final third contract at 3 Points with a static (All-Out) 5 Point profit target. One thing to make clear: This is one possible trade scenario, so preferably avoid thinking we want to trade always with a 5 Point Target and 3 Point Stop. It depends on the trade situation and the situation adjusts the risk parameters (Stop/Target) higher or lower. Anyway, here the figure with the additionally Stop Scale Method:

Tuesday, March 22, 2016

Crude Oil Market Observations

As a follow-up of the video analysis I thought to share some updated observations on Crude oil. Especially to point out is the mentioned rotational market behavior around the acceptance area in the weekly volume profile. Here the current supportive level as well as the resistance area from the weekly volume profile:

Looking at the daily profiles, we opened inside of the volume value. So, a possible rotational behavior between the value extrems was pretty expected. If you consider the weekly levels over the daily levels, you can quickly understand today's market action. However, it seems like our lovely 'P' shaped profile is visible and additionally we opend above the TPO value. Why not consider the VPOC and the TPO VAH as support then? Firstly we did not took out any high or low in terms of grabbing liquidity. Secondly, again the weekly levels are more important that the daily areas of interest.

If we take a look at the plain daily perspective, we can observe the seeming end of a three day one-time-framing higher behavior as Friday's low got taken out yesterday. Actually, the market closed above Friday's low, so we can't consider this as a break, I guess. However, we can conclude that buyers and sellers are in agreement of this balanced price range and awaiting the Crude oil inventories this week so far.

We should also take a look at the weekly timeframe by the way. Looking at this, we can identify a on time framing higher behavior that is occuring since several weeks. Also to notice is this previous small balance area that seem to serve as resistance currently.

We will see in which direction the market will break. Anyway, I will monitor today's close for any possible indications to conclude a possible "break-out because of inventories" scenario for the next day. Stay focused.

Monday, March 21, 2016

Crude Oil Video Recap and Analysis

Here is my first video recap and analysis on Crude Oil. Don't go crazy with me as english is not my native language. I apologize for any spelling releated mistakes here. I will keep improve my ability to provide a better video for sure, so any feedback is welcome. Actually, I messed up the shitty end of this video as the music plays later, lol. Anyway, hopefully you can enjoy it in some way and maybe I have to stick to the text format analysis:

Here the link to the video.

Sunday, March 13, 2016

Crude Oil Volume Profile Observations

As mentioned last week on Twitter, I thought to provide some observations with TPO and volume profiles. We will take a look on the WTI Crude oil market as it seems most traders are in love with this lovely beast. However, you can use this process on any other market as well.

Last week we discussed the importance to assign a filter process in order to better understand what the larger picture is showing. With going through the periodicity hierarchy of Yearly, Monthly, Weekly timeframes we can understand the higher time frame (HTF) and figure out the path of least resistance. That said, you can use this filter process on TPO/Volume profile charts to find some nice additional levels in the overall macro structure that are confluent with your intra-day trading levels.

When looking at a Volume Profile, we are looking for areas of acceptance and rejection. In acceptance areas market participants are in agreement on price while in rejection areas, one side of the market participants are not interested on a particular price and quickly reject these levels. Actually, you could call acceptance areas balance while rejection areas would be the extremes of that balance. Well, why identifying thes areas on a higher time frame now? The answer is quite simple: An intra-day level has less significance than a weekly level or a monthly level because the large market won't recognize the day trader’s shitty little whatsoever level when the market rejects the monthly profile's low volume area. This is the reason of the importance to figure out the path of least resistance on a macro scale.

Let's try to visualize this now. Looking at the monthly profiles, we can observe that the market opened inside of the previous month's balanced range and value. The conclusion would be a rotational behavior for this month and to trade the balance extremes of this profile. However, the previous month's high got taken out and we broke out of that balance to trend higher. Here a screenshot with the mentioned acceptance/rejection areas:

As you can see the rejection areas served as nice support/resistance levels. I also drew the distribution curves into this profile to highlight the acceptance areas (black).

Looking at the current month, we can see a current weak high and low. Also to mention is the weak high back from January. Poor/Weak/Unsecured highs and lows are potential areas to revisit.

Before we getting biased, let's take a look at the weekly profiles. The previous week rejected the previous highs and was quite rotational with a close inside of the time value and above the volume value. Based where we closed I plotted some potential scenarios into this chart for the next week. To mention is the current unsecured low as a potential area to revisit.

Moving forward to the daily profiles, we can cleary see our favorite 'P' shaped profile. A P shaped profile as we know suggests short covering. It seems the market grabbed some liquidity above the highs. With that said, I am quite bearish for the next day. The open and the reaction around value/POC will have a significant effect on how I handle the market. Based where the market closed I would look to short the VPOC with a target around the next liquidity area. A break above could lead us to higher prices obviously.

However, these are my own current views and could change with the time moving forward. Please do you own research because I posted this analysis process just for educational purposes only. Moreover it's only one brick of my whole analysis process. I would share some more details but the time is precious. I thinking about to create a video or do a livestream for the next time as it takes a huge amount of my time to write posts.

If you want to learn more about Market Profile take a look at the books from Jim Dalton. Recommendable is Doug Tucker’s Market Profile Primer and the original CBOT Market Profile handbook if you like free stuff. If you are a member of The Private Banker you can read educational articles about the Market Profile and the Volume Profile as well.

Let's do our best next week and as said I will try to create a video next time. Anyway, hopefully this article is of some help for you.